EU, U.S. Work on Aircraft Subsidies

European Union and U.S. officials have agreed to work together to improve a 1992 deal that allows billions to be spent on subsidies to aircraft makers Airbus Industrie and Boeing Co.

In a joint statement Friday, the two sides said they had held "productive" consultations on Thursday, their first meeting in about a year on aircraft subsidies.

Questions were raised about the $3.5 billion in government-guaranteed loans being extended to Airbus to develop its new A380 superjumbo, which aims to challenge the Boeing 747's dominance of the long-haul market.

"The EU responded," the statement said. An EU spokesman declined to elaborate.

The EU raised questions about recent U.S. legislation authorizing the lease of 100 Boeing 767 tanker aircraft to the U.S. Air Force. No details were provided.

Both sides agreed to "explore ways and means to improve the functioning" of the bilateral agreement, which had "reduced government support and thereby avoided litigation since 1992," the statement said.

Under the accord, the EU is entitled to provide direct support in the form of loans for up to a third of the total development costs of large civilian aircraft for Airbus.

The EU said last year its support would be below that level, but the problem has been in interpretation.

The EU argues that the loans are aimed at research and development, while Washington believes that since Airbus now gets roughly half of new aircraft orders worldwide, it no longer needs government handouts.

The deal also sets guidelines for indirect subsidies, such as defense contracts, at 3 percent of sales, which is designed to curb U.S. aid to its manufacturers.

The two sides traded sharp barbs about Airbus subsidies a year ago, but since then have tried to play down the dispute. In part, that's because Airbus hasn't received many additional orders for the A380 after an initial burst, and the aircraft market has fallen sharply since the Sept. 11 terrorist attacks.